GDP grows 1% in the first quarter, slightly lower than expected

Influenced by the reopening process, the Brazilian economy continues its recovery path after two years of the Covid-19 pandemic. Data released by the IBGE this Thursday show that the Gross Domestic Product (GDP, set of goods and services produced by the country) advanced 1% in the first quarter of 2022 compared to the fourth quarter of last year.

That’s more than the growth recorded in the previous two quarters, but less than what the market expected. Economists had forecast a rise of 1.2%, according to the average of forecasts from analysts polled by Bloomberg.

Compared to the first quarter of last year, GDP grew 1.7%. Compared to the fourth quarter of 2019, it is 1.6% above the pre-pandemic period. But, despite the increase, we went back eight years and economists indicate that the economy will lose steam in the second half of the year.

– We are at the same level of GDP as in the second quarter of 2013 – explains Claudia Dionisio, from IBGE.

The performance of the first quarter was driven by the services sector, which represents 70% of GDP and which was severely affected during periods of greater restrictions due to Covid. From the point of view of production, it was the only sector that grew in the quarter: an increase of 1% in relation to the last quarter of last year.

Services provided to families, such as accommodation and food, performed well, as did the transport segment, boosted by the increase in e-commerce in the country. With more online shopping, the greater the demand for freight transport.

Fall in agro, with lack of rains

Agriculture, which boosted growth in other quarters, dropped 0.9% and industry remained stable, with expansion of only 0.1%. The decline in livestock was mainly impacted by the drought in the South, which caused a decrease in the estimated production of soybeans, the largest Brazilian crop, highlighted Rebeca Palis, coordinator of National Accounts at the IBGE.

From the demand perspective, the positive result of household consumption indicates that it is responding to the fiscal stimulus granted in the period. There was growth of 0.7% in the quarter.

– Demand is also related to services that are mainly done in person, such as activities related to travel – says Rebeca.

Investment drops 3.5%

Government consumption was stable (+0.1%). Investments (Gross Fixed Capital Formation) fell by 3.5%.

– This drop was impacted by the decrease in the production and import of capital goods, despite the construction having grown in the period – explains Rebeca.

Imports advanced only 0.1% in the quarter, which points to stability. Exports, on the other hand, grew by 5%, driven by high commodity prices.

The investment rate in the first quarter was 18.7% of GDP, below that recorded in the same period last year (19.7%), when the country was still very affected by the restrictions imposed by the pandemic.

BC strike affects publicity

The IBGE informed that in this publication it was not possible to inform the data of the Integrated Economic Accounts and the Financial Account, which include the capacity and need for financing of the economy and the savings rate, due to the absence of disclosure of the Balance of Payments by the Central Bank. of Brazil with data referring to the month of March.

Comparison with the 1st quarter of 2021

Compared to the first quarter of last year, the fall in agriculture was significant. It dropped 8% in this comparison, a result that can be explained by the decrease in the estimated production of some crops whose harvests are important in the first quarter, such as soybeans and rice.

Industry also had a fall (-1.5%), with a decline in ore extraction and manufacturing of electrical machines and appliances, among others.

Once again, services were the only sector to grow, with an increase of 3.7%, driven by on-site activities, which rose 12.6%.

Investments plummeted 7.2%, while household consumption advanced 2.2%.

High interest rate will impact GDP in the 2nd semester

Analysts estimate that activity should continue in the positive field, although with some deceleration at the margin. This is because there is a continuity of the economic reopening process and the injection of fiscal stimuli in the period, which can boost household consumption for longer.

The challenge regarding the performance of the activity is concentrated on the projections for the second half of the year, when the economy is expected to lose strength due to the impact of high interest rates, which have occurred since last year.

“These factors that helped in the first half will lose strength in the second, and our expectation is that the economy will feel the impacts of a more contractionary monetary policy,” says Mirella Hirakawa, economist at AZ Quest.

Editor’s note: A first version of this report cited the growth projection of Valor Data for GDP. The figure cited, of 1.4%, was the forecast of the analysts consulted by Valor Data for the GDP result for the year, and not for the variation in the 1st quarter as was mistakenly mentioned.

Source: The Globe